How to Enter Fees on Sales Transactions in QuickBooks

Love your QuickBooks tips and tricks section. Thank you! In one of your posts, “How to Process PayPal Sales in QuickBooks, ” you mention “you can add the fees right on the sales receipt. Create an other charge item called something like “PayPal fees” and map it to your expense account. When you use it on a sales receipt, enter a negative number for the fee. This will reduce the deposit to the net amount that’s actually deposited to PayPal.” My question is, what if we don’t use Sales Receipts and we just go from Sales Orders to Invoices? Should we do the same as you explain, on the S.O. or Invoice? And just to be sure I have it right, the Paypal fee then will be shown as an invoiced discount for the customer (in the amount of the fee), which is paid by one of my expense accounts? Thanks again!
You can enter negatives on sales orders and invoices as well, just about any transaction actually. It’s one of my favorite tricks for fixing things. The question is, do you want your clients to see the fees. If so, go for it. If not, send them the sales order or invoice without the fee and then go back in and edit it to add the fee. You can also add the fees directly onto the deposit, once again as a negative. Keep in mind that the transaction total cannot be negative, though.

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This article is provided for informational purposes and is not intended to be construed as legal, accounting, or other professional advice. For further information, please consult appropriate professional advice from your attorney and certified public accountant.

Ruth Perryman - QuickBooks Specialist Written by +Ruth Perryman

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2 Responses to How to Enter Fees on Sales Transactions in QuickBooks

  • The reporting of “negatives” on a sales invoice causes a problem when we run reports on a cash basis. For example: There is a Paypal sale on December 28th for which funds do not become available until January. For management reporting purposes, we want to see that sale sitting in A/R (net of paypal fees) at the end of the year. Therefore, we create an invoice which essentially results in a debit to A/R, debit to paypal fee expense, credit to merchandise sales. When we run accrual basis reports for internal purposes, all is well. However, when we run the reports using the cash basis option (which we need for tax purposes), the paypal fee amount is added to merchandise sales and the paypal fee expense account stays the same. In other words, revenue and expense are both overstated by the amount of paypal fees. No net impact, but the reporting at the account level is no longer correct. We haven’t been able to figure out how to get Quickbooks to reduce the paypal fees when converting to cash basis as opposed to increasing sales.

    I guess one option is to report the A/R and sales gross and only account for the Paypal fees when the cash actually becomes available in our Paypal account or is transferred to our bank account. This isn’t our preference since we want the A/R to accurately represent the net amount we expect to receive.

    The other thought we had was to create some sort of a contra revenue item to replace the Paypal fee expense item on the invoice. Don’t know if this will work or not, but we might give it a try. It appears reporting an expense item on the invoice is what is causing the issue.

    If you have seen this before or if you have any thoughts on the matter, we’d love to hear from you! Thanks!

    • Hi Margaret,

      For cash-basis taxpayers, the money paid through PayPal should be included as revenue and associated expense when it’s received not when it’s transferred to your checking account. You should setup a bank account for the PayPal account and treat it like any other bank account, including not using it for personal expenses. When you transfer funds from PayPal to your checking account, use Banking > Make Transfers.

      Of course, you should review this with your own CPA or tax professional.